cc 2014 annual report_lr -final

7/25/2019 Cc 2014 Annual Report_lr -Final

1/144

Yesterday. Today. Tomorrow

14

20

ANNUAL REPORT


2/144

1936 Bottle-capping machine.


3/144

To OurShareholders

1

J. Frank Harrison, III

Chairman of the Board andChief Executive Officer

Henry W. Flint

President andChief Operating Officer

As we close another solid year in our Companys 110-plus-ye

history, we would like to take this opportunity to honor t

accomplishments of those who came before us. We have be

tremendously blessed with an enduring legacy which provides

strong foundation for tomorrows opportunities. We have grow

from a local bottler in Greensboro, N.C. in 1902 to the nation

largest independent Coca-Cola bottler with franchise rights in

states. We have expanded from selling one product in one packa

size Coca-Cola in single-serve glass bottles to selling mothan 250 brands and avors in a wide variety of package typ

and sizes in multiple channels. We have evolved in all areas

our operations - not only keeping pace with the changing tim

but leading innovation in the beverage industry through new a

improved product offerings, packaging types, manufacturing p

cesses, warehousing systems, distribution methods and marketi

programs. In addition, our founders nurtured a culture of cari

and service within our Company which continues to this day. W

hope you enjoy the images depicting the transformation of o

Company over the past 110-plus years on the accompanying pag

of this report.

The year 2014 was another transformative year in Coke Consolidatedhistory. As disclosed in the accompanying nancial statemen

our more than 7,000 devoted employees delivered solid nanc

results in our legacy territory while working earnestly to expa

our territory to Johnson City, Morristown and Knoxville, Te

We also announced denitive agreements to acquire territory

Lexington and Louisville, Ky.; Cookeville and Cleveland, Ten

and Evansville, Ind. and are working diligently to transition tho

territories in 2015. We continued to drive industry innovati

through new product and package offerings such as Coca-Co

Life and the 253 ml bottle and operational improvements su

as the installation of our third automated warehouse system

Clayton, N.C.

As we look to the future, we will continue to drive our purpose

Honor God in All We Do by serving others, pursuing excellen

and growing protably. We will work to serve our communit

through existing and new outreach initiatives and continue to

a leader in responsible environmental stewardship. We will foc

on growing our core business through increasing market sha

innovation, continuous improvement and territory expansion

portunities. As we have throughout our history, we will respond

consumer demand and preferences by ensuring we have the rig

product in the right package in the right place at the right time

every consumption occasion for every consumer. We will look f

opportunities to operate more efciently and leverage our cocompetencies through complementary businesses.

Though much has changed in the past 110-plus years, much h

stayed the same. We still sell the same great brand, Coca-Cola, a

we remain rmly committed to excellence in selling, innovati

and continuous improvement to create long-term value for o

shareholders. We are grateful for our long-standing heritage, a

we are more optimistic than ever about our future. Thank you f

your ongoing support.


4/144

Territory GrowthFrom a small-town bottler to the largest independent

bottler in the U.S. with operations in 12 states.

1902Charlotte Coca-Cola

Bottling Co. opens in

April as North Carolinas

first Coca-Cola bottling

plant. Greensboro opens

later the same year.

1989CCBCCacquires

the franchise

rights for major

territories in

West Virginia.

1973The Harrison and

Snyder bottling

operations are

merged, creating

a company that

serves a large part

of North Carolina.

1991With the acquisition

of Sunbelt Coca-Cola

CCBCCbecomes the

second largest

Coca-Cola bottler

in the U.S.

2

1984CCBCCbegins

rapid growth,

expanding the

Company into

10southeastern

states.

1902 Horse-and-wagon delivery team.


5/144

3

2010CCBCC

becomes

the nations

largest

independent

bottler.

1993CCBCCforms

Piedmont Coca-Cola

Bottling Partnership

with The Coca-Cola

Company to expand

territory in eastern

North Carolina and

South Carolina.

1994CCBCCs

territory has 15.4

million consumers

more than five

times as many

as in 1984.

2014The Company

now has a

consumer base

of approximatel

22.4million

people.

2013CCBCCannounces

letter of intent with

The Coca-Cola

Company to expand

its franchise territory

in parts of Tennessee,

Kentucky and Indiana.

1970 2014

1931 Lindley Field, outside Greensboro, N.C., site of todays Piedmont Triad International Airp


6/144

The Company started with one product Coca-Cola in

single-serve glass bottles in 1902. Today, CCBCC offers

more than 250 brands and flavors of beverages.

4

1954Company 12-pack unveiling event.

1902One single

product,

Coca-Cola,

is sold in a

6-ounce

refillable

bottle.

1955CCBCC

debuts the

10-, 12- and

26-ounce

king-sized

and family-

sized bottles.

1916Coca-Cola

bottlers

approve

the contour

bottle

design.

1923Six-pack

cardboard

carton is

introduced

as a home

package with

a handle of

invitation.

1982Diet Coke

and

Caffeine-free

Coke are

introduced.

1993The plasti

contour

bottle is

introduced


7/144

2005Coke Zero

debuts.

2013The Company

offers almost

240brands

and flavors

of beverages.

2001First bottler

to produce

and distribute

the Fridge

Pack.

2006CCBCC

introduces

Tum-E Yummies.

Within five years,

it is available in

95 percent of

the U.S.

2014CCBCC

introduce

Coca-Col

Life and

the 253 m

bottle.

1999First bottler

to produce

and market

Dasani.

5

2001 Dasani Fridge Pack Display.

2013CCBCCoffers almost 240brands and avors of bever

2006Tum-E Yummies.


8/144

1902Bottling Coca-Cola in

single-serve glass bottles.

1960Coca-Cola in cans

becomes widely available.

1950Canned soft drinks

are introduced.

6

In 1902, employees manually washed and

filled bottles. Today, the production process is

highly sophisticated and automated.

1902Bottling Coca-Cola in single-serve glass bottles.

1905Bottling operation.

1974Snyder Production

Center opens in

Charlotte.


9/144

1977PET packaging in the

two-liter size is introduced.

1992Snyder Production Center

is one of the highest

volume multipackaging

plants in the world.

2012First bottler to have all

production centers compliant

with Occupational Health and

Safety Management System

standards and ISO (Internatio

Organization for Standardizati

food safety, quality and

environmental standards.

7

2012 Snyder Production Center.


10/144

1931Warehouse operations: Stack, store and then ship.

When the Company began, horse-drawn wagons delivered

a single product. Over the years, the Company has implemented

a pre-sell system, deployed technology and streamlined its

warehousing and distribution system to accommodate multiple

product offerings and package sizes.

8

19026-ounce bottled

Coca-Cola in boxed

crates is delivered

by horse-drawn

carriage.

1935The first

standardized

coin-operated

vending machines

come into use.

1910sFirst motorized

trucks used for

delivery.

1980sIntroduction of

dedicated bulk

delivery routes to

deliver Coke products

to supermarkets with

merchandisers placing

product in the store.

2000sOngoing

consolidation

of distribution

centers

improves

operational

efficiency.


11/144

9

2014 Warehouse operations in Charlo

2006CooLift.

2003CCBCCconverts to a

pre-sell, or predictive,

sales model, greatly

reducing inventories

and streamlining the

distribution process.

2008First automated

manufacturing and

order-fulfillment

system is installed

in Charlotte.

2006CCBCCintroduces the

CooLiftdelivery system,

a newly designed powered

lift and pre-built sales

orders on custom pallets.

2013CCBCC installs an

automated warehouse

system in La Vergne,

Tenn.


12/144

1902Horse-and-wagon

advertising.

Community Involvement& Sustainability

10

Hand-painted Coca-Cola signs on the sides of buildings

were early symbols of community support. Over the years,

CCBCC has demonstrated an unwavering commitment tothe environment, stewardship and the communities it serves.

1985Coca-Cola

becomes the

sponsor of the

Coca-Cola 600 at

Charlotte Motor

Speedway.

1989CCBCCdevelops

the Thrills

under-the-cap

promotion featuring

tickets to area

theme and

amusement parks.

1990CCBCCworks with

the city of Charlotte

to establish curbside

recycling and supports

like efforts in Mobile,

Ala., Raleigh, N.C.,

Charleston, W.Va.,

and Roanoke, Va.

1911Charlotte

Coca-Cola

Bottling Co.

paints the side

of its building

with a mural.

2009 RecyclingPrize Patrol.


13/144

2004CCBCClaunches its

formal Stewardship

Program, connecting

opportunities for

employees to support

each other and reach

out to the community.

2011CCBCCbegins

refurbishing building

murals in towns and

cities throughout its

territory.

2012In less than two

years, CCBCC

cuts landfill

waste in half.

2014Share a Co

becomes a

summer

phenomeno

2009Recycle and Win

program is created.

Residents can win

gift certificates to

grocery stores when

they recycle.

2011Sign restoration.

2011Homecoming Halftime Challenge at Johnson C. Smith University in Charlotte, N.C.

11


14/144

12

The values of hard work and integrity, dedication to quality, spirit

of innovation and commitment to the communities we serve that

existed in 1902 are very much alive today at CCBCC. As we

grow our territory in neighboring regions, we are excited about

the opportunity to expand our business, leverage our capabilities,

learn from new employees and get involved in these communities.

We thank the many employees throughout the years, including

the more than 7,000today, who brought and continue to bring

all this history to life.

1940s Route Salesmen.


15/144

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 2014

Commission file number 0-9286

(Exact name of registrant as specified in its charter)

Delaware 56-0950585

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification Number)

4100 Coca-Cola Plaza, Charlotte, North Carolina 28211

(Address of principal executive offices) (Zip Code)

(704) 557-4400

(Registrants telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:Title of Each Class Name of Each Exchange on Which Registered

Common Stock, $1.00 Par Value The NASDAQ Global Select Market

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will notbe contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smallerreporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 ofthe Exchange Act.

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to theprice at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day ofthe registrants most recently completed second fiscal quarter.

Market Value as of

June 27, 2014Common Stock, $l.00 Par Value $347,312,260Class B Common Stock, $l.00 Par Value *

* No market exists for the shares of Class B Common Stock, which is neither registered under Section 12 of the Act nor subject to Section 15(d) of the Act.The Class B Common Stock is convertible into Common Stock on a share-for-share basis at the option of the holder.

Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.

ClassOutstanding as ofFebruary 27, 2015

Common Stock, $1.00 Par Value 7,141,447Class B Common Stock, $1.00 Par Value 2,129,862

Documents Incorporated by Reference

Portions of Proxy Statement to be filed pursuant to Section 14 of the Exchange Act with respect to the 2015 AnnualMeeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part III, Items 10-14


16/144


17/144

Table of Contents

Page

Part I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Executive Officers of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Part II

Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations . . . . . 30

Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . 113

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Part III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . 114

Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Part IV

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123


18/144


19/144

PART I

Item 1. Business

Introduction

Coca-Cola Bottling Co. Consolidated, a Delaware corporation (together with its majority-owned

subsidiaries, the Company), produces, markets and distributes nonalcoholic beverages, primarily products of

The Coca-Cola Company, Atlanta, Georgia (The Coca-Cola Company), which include some of the most

recognized and popular beverage brands in the world. The Company, which was incorporated in 1980, and its

predecessors have been in the nonalcoholic beverage manufacturing and distribution business since 1902. The

Company is the largest independent Coca-Cola bottler in the United States.

In April 2013, as part of The Coca-Cola Companys plans to refranchise a substantial portion of its North

American bottling territories, the Company and The Coca-Cola Company signed a nonbinding letter of intent to

expand the geographic regions served by the Company with the Company acquiring the rights to serve certain

markets in Tennessee, Kentucky and Indiana previously served by Coca-Cola Refreshments USA, Inc. (CCR),

a wholly-owned subsidiary of The Coca-Cola Company (individually an Expansion Territory and collectively,

the Expansion Territories). Beginning in May 2014, the Company has entered into a series of transactions with

CCR (four of which have been completed and the remaining two of which are expected to be completed in

Spring 2015) to allow the Company to take over serving the Expansion Territories. The Companys rights to

distribute and market beverage products of The Coca-Cola Company in the Expansion Territories (with limitedexceptions) are governed exclusively by a Comprehensive Beverage Agreement (CBA) for each Expansion

Territory and are different from the rights the Company holds under agreements with The Coca-Cola Company

to serve the markets located in North and South Carolina, South Alabama, South Georgia, Central Tennessee,

Western Virginia and West Virginia the Company has previously served and is continuing to serve (individually,

a Legacy Territory and collectively, the Legacy Territories).

The Expansion Territories and their actual or expected closing dates are as follows:

Expansion Territory Actual/Expected Closing Date

Johnson City and Morristown, Tennessee May 2014

Knoxville, Tennessee October 2014

Cleveland and Cookeville, Tennessee January 2015

Louisville, Kentucky and Evansville, Indiana February 2015

Lexington, Kentucky Spring 2015

Paducah and Pikeville, Kentucky Spring 2015

As of December 28, 2014, The Coca-Cola Company had a 34.8% interest in the Companys outstanding

Common Stock, representing 5.0% of the total voting power of the Companys Common Stock and Class B

Common Stock voting together as a single class. The Coca-Cola Company does not own any shares of Class B

Common Stock of the Company. J. Frank Harrison, III, the Companys Chairman of the Board and Chief

Executive Officer, currently owns or controls approximately 86% of the combined voting power of the

Companys outstanding Common Stock and Class B Common Stock.

General

Nonalcoholic beverage products can be broken down into two categories:

Sparkling beverages beverages with carbonation, including energy drinks; and

Still beverages beverages without carbonation, including bottled water, tea, ready-to-drink coffee,

enhanced water, juices and sports drinks.

Sales of sparkling beverages were approximately 81%, 82% and 82% of total net sales for fiscal 2014

(2014), fiscal 2013 (2013) and fiscal 2012 (2012), respectively. Sales of still beverages were

approximately 19%, 18%, and 18% of total net sales for 2014, 2013 and 2012, respectively.

1


20/144

The Company holds Cola Beverage Agreements and Allied Beverage Agreements under which it produces,

distributes and markets, in certain regions comprising the Legacy Territories, sparkling beverages of The

Coca-Cola Company. The Company also holds Still Beverage Agreements under which it distributes and markets

in certain regions comprising the Legacy Territories still beverages of The Coca-Cola Company such as

POWERade, vitaminwater and Minute Maid Juices To Go and produces, distributes and markets Dasani water

products. For those regions comprising the Expansion Territories (except the Lexington, Kentucky region), the

Company has entered into or will enter into CBAs authorizing the Company to distribute and market in thoseregions both sparkling beverages and still beverages of The Coca-Cola Company.

The Company holds agreements to produce, distribute and market Dr Pepper in some of the regions

comprising the Legacy Territories. The Company also distributes and markets various other products, including

Monster Energy products and Sundrop, in one or more of the Companys regions, including, in the case of

Monster Energy products, some of the Expansion Territories, under agreements with the companies that hold and

license the use of their trademarks for these beverages. In addition, the Company produces beverages for other

Coca-Cola bottlers. In some instances, the Company distributes beverages in the Legacy Territories without a

written agreement.

The Companys principal sparkling beverage is Coca-Cola. In each of the last three fiscal years, sales of

products bearing the Coca-Cola or Coke trademark have accounted for more than half of the Companys

bottle/can volume to retail customers. In total, products of The Coca-Cola Company accounted for approximately

88% of the Companys bottle/can volume to retail customers during 2014, 2013 and 2012.

The Company offers a range of flavors designed to meet the demands of the Companys consumers. The

main packaging materials for the Companys beverages are plastic bottles and aluminum cans. In addition, the

Company provides restaurants and other immediate consumption outlets with fountain products (post-mix).

Fountain products are dispensed through equipment that mixes the fountain syrup with carbonated or still water,

enabling fountain retailers to sell finished products to consumers in cups or glasses.

The Company has also developed, marketed and distributed certain products which it owns. These products

include Tum-E Yummies, a vitamin-C enhanced flavored drink, and Fuel in a Bottle power shots. The Company

markets and sells these products nationally. CCR distributes Tum-E Yummies nationally. Certain other

Coca-Cola franchise bottlers also distribute Tum-E Yummies in the regions they serve. In the non-binding letter

of intent the Company and The Coca-Cola Company signed in April 2013, the parties set forth their intent to

agree on the terms of the future purchase by The Coca-Cola Company of the Companys subsidiary that

develops, sells and markets these branded products. The Company and The Coca-Cola Company are currently

negotiating but have not reached final agreement on the terms of the proposed purchase agreement.

2


21/144

The following table sets forth some of the Companys most important products, including both products that

The Coca-Cola Company and other beverage companies have licensed to the Company and products that the

Company owns.

The Coca-Cola Company

Sparkling Beverages(including Energy

Products) Still Beverages

Products Licensedby Other Beverage

CompaniesCompany Owned

Products

Coca-Cola glacau smartwater Dr Pepper Tum-E Yummies

Diet Coke glacau vitaminwater Diet Dr Pepper Fuel in a Bottle

Coca-Cola Zero Dasani Sundrop

Coca-Cola Life Dasani Flavors Monster Energy

Sprite Powerade products

Fanta Flavors Powerade Zero

Sprite Zero Minute Maid Adult

Mello Yello Refreshments

Cherry Coke Minute Maid Juices

Seagrams Ginger Ale To Go

Cherry Coke Zero Gold Peak tea

Diet Coke Splenda FUZE

FrescaPibb Xtra

Barqs Root Beer

TAB

Full Throttle

NOS

Beverage Agreements

The Company holds a number of contracts with The Coca-Cola Company which entitle the Company to

produce, market and distribute in the Companys Legacy Territories The Coca-Cola Companys nonalcoholic

beverages in bottles, cans and five gallon pressurized pre-mix containers. The Company has similar arrangements

for the Companys Legacy Territories with Dr Pepper Snapple Group, Inc. and other beverage companies. For

the Expansion Territories acquired in 2014, the Company holds its rights to market and distribute The Coca-ColaCompanys nonalcoholic beverages under a CBA for each Expansion Territory that does not include the right to

produce such beverages. Instead, the Company and CCR have entered into a Finished Goods Supply Agreement

for each Expansion Territory pursuant to which the Company purchases from CCR substantially all of the

Companys requirements for The Coca-Cola Companys nonalcoholic beverages and related products and for the

cross-licensed brands the Company has the right to market and distribute in such Expansion Territory. The CBA

and the Finished Goods Supply Agreement for the Expansion Territories are described below following the

description of the contracts for the Legacy Territories under the heading Beverage Agreements with The

Coca-Cola Company for the Expansion Territories.

Cola and Allied Beverage Agreements with The Coca-Cola Company for the Legacy Territories.

The Company purchases concentrates from The Coca-Cola Company and produces, markets and distributes

its principal sparkling beverages within its Legacy Territories under two basic forms of beverage agreementswith The Coca-Cola Company: (i) beverage agreements that cover sparkling beverages bearing the trademark

Coca-Cola or Coke (the Coca-Cola Trademark Beverages and Cola Beverage Agreements), and

(ii) beverage agreements that cover other sparkling beverages of The Coca-Cola Company (the Allied

Beverages and Allied Beverage Agreements) (referred to collectively in this report as the Cola and Allied

Beverage Agreements), although in some instances the Company distributes sparkling beverages without a

written agreement. The Company is a party to Cola Beverage Agreements and Allied Beverage Agreements for

various specified Legacy Territories.

3


22/144

Cola Beverage Agreements with The Coca-Cola Company for the Legacy Territories.

Exclusivity. The Cola Beverage Agreements for the Legacy Territories provide that the Company will

purchase its entire requirements of concentrates or syrups for Coca-Cola Trademark Beverages from The

Coca-Cola Company at prices, terms of payment, and other terms and conditions of supply determined from

time-to-time by The Coca-Cola Company at its sole discretion. The Company may not produce, distribute, or

handle cola products other than those of The Coca-Cola Company. The Company has the exclusive right to

manufacture and distribute Coca-Cola Trademark Beverages for sale in authorized containers within its Legacy

Territories. The Coca-Cola Company may determine, at its sole discretion, what types of containers are

authorized for use with products of The Coca-Cola Company. The Company may not sell Coca-Cola Trademark

Beverages outside its Legacy Territories except by agreement with The Coca-Cola Company.

Company Obligations. The Company is obligated, among other things, to:

maintain such plant and equipment, staff and distribution and vending facilities that are capable of

manufacturing, packaging, and distributing Coca-Cola Trademark Beverages in accordance with the Cola

Beverage Agreements and in sufficient quantities to satisfy fully the demand for these beverages in its

Legacy Territories;

undertake quality control measures and maintain sanitation standards prescribed by The Coca-Cola

Company;

develop, stimulate and satisfy fully the demand for Coca-Cola Trademark Beverages in its Legacy

Territories;

use all approved means and spend such funds on advertising and other forms of marketing as may be

reasonably required to satisfy that objective; and

maintain such sound financial capacity as may be reasonably necessary to ensure its performance of its

obligations to The Coca-Cola Company.

The Company is required to meet annually with The Coca-Cola Company to present its marketing,

management, and advertising plans for the Coca-Cola Trademark Beverages for the upcoming year, including

financial plans showing that the Company has the consolidated financial capacity to perform its duties and

obligations to The Coca-Cola Company. The Coca-Cola Company may not unreasonably withhold approval of

such plans. If the Company carries out its plans in all material respects, the Company will be deemed to havesatisfied the Companys obligations to develop, stimulate, and satisfy fully the demand for the Coca-Cola

Trademark Beverages and to maintain the requisite financial capacity for the period of time covered by the plan.

Failure to carry out such plans in all material respects would constitute an event of default that, if not cured

within 120 days of written notice of the failure, would give The Coca-Cola Company the right to terminate the

Cola Beverage Agreements. If the Company, at any time, fails to carry out a plan in all material respects in any

geographic segment of its Legacy Territories, as defined by The Coca-Cola Company, and if such failure is not

cured within six months of written notice of the failure, The Coca-Cola Company may reduce the territory

covered by that Cola Beverage Agreement by eliminating the portion of the territory in which such failure has

occurred.

The Coca-Cola Company has no obligation under the Cola Beverage Agreements to participate with the

Company in expenditures for advertising and marketing. As it has in the past, The Coca-Cola Company may

contribute to such expenditures and undertake independent advertising and marketing activities, as well as

advertising and sales promotion programs which require mutual cooperation and financial support of the Company.

The future levels of marketing funding support and promotional funds provided by The Coca-Cola Company may

vary materially from the levels provided during the periods covered by the information included in this report.

Acquisition of Other Bottlers. If the Company acquires control, directly or indirectly, of any bottler of

Coca-Cola Trademark Beverages, or any party controlling a bottler of Coca-Cola Trademark Beverages, the

Company must cause the acquired bottler to amend its agreement for the Coca-Cola Trademark Beverages to

conform to the terms of the Cola Beverage Agreements.

4


23/144

Term and Termination. The Cola Beverage Agreements are perpetual, but they are subject to

termination by The Coca-Cola Company upon the occurrence of an event of default by the Company. Events of

default with respect to each Cola Beverage Agreement include:

production, sale or ownership in any entity which produces or sells any cola product not authorized by

The Coca-Cola Company or a cola product that might be confused with or is an imitation of the trade

dress, trademark, tradename or authorized container of a cola product of The Coca-Cola Company;

insolvency, bankruptcy, dissolution, receivership, or the like;

any disposition by the Company of any voting securities of any bottling company subsidiary without the

consent of The Coca-Cola Company; and

any material breach of any of its obligations under that Cola Beverage Agreement that remains

unresolved for 120 days after written notice by The Coca-Cola Company.

If any Cola Beverage Agreement is terminated because of an event of default, The Coca-Cola Company has

the right to terminate all other Cola Beverage Agreements the Company holds.

No Assignments. The Company is prohibited from assigning, transferring or pledging its Cola Beverage

Agreements or any interest therein, whether voluntarily or by operation of law, without the prior consent of The

Coca-Cola Company.

Allied Beverage Agreements with The Coca-Cola Company for the Legacy Territories.

The Allied Beverages are beverages of The Coca-Cola Company or its subsidiaries that are sparkling

beverages, but not Coca-Cola Trademark Beverages. The Allied Beverage Agreements contain provisions that

are similar to those of the Cola Beverage Agreements with respect to the sale of beverages outside its Legacy

Territories, authorized containers, planning, quality control, transfer restrictions, and related matters but have

certain significant differences from the Cola Beverage Agreements.

Exclusivity. Under the Allied Beverage Agreements, the Company has exclusive rights to distribute the

Allied Beverages in authorized containers in specified Legacy Territories. Like the Cola Beverage Agreements,

the Company has advertising, marketing, and promotional obligations, but without restriction for most brands as

to the marketing of products with similar flavors, as long as there is no manufacturing or handling of other

products that would imitate, infringe upon, or cause confusion with, the products of The Coca-Cola Company.

The Coca-Cola Company has the right to discontinue any or all Allied Beverages, and the Company has a right,

but not an obligation, under the Allied Beverage Agreements to elect to market any new beverage introduced by

The Coca-Cola Company under the trademarks covered by the respective Allied Beverage Agreements.

Term and Termination. Allied Beverage Agreements have a term of 10 years and are renewable by the

Company for an additional 10 years at the end of each term. Renewal is at the Companys option. The Company

currently intends to renew substantially all of the Allied Beverage Agreements as they expire. The Allied

Beverage Agreements are subject to termination in the event of default by the Company. The Coca-Cola

Company may terminate an Allied Beverage Agreement in the event of:


termination of a Cola Beverage Agreement by either party for any reason; or

any material breach of any of the Companys obligations under that Allied Beverage Agreement thatremains unresolved for 120 days after required prior written notice by The Coca-Cola Company.

5


24/144

Supplementary Agreement Relating to Cola and Allied Beverage Agreements with The Coca-Cola Company

for the Legacy Territories.

The Company and The Coca-Cola Company are also parties to a Letter Agreement (the Supplementary

Agreement) that supplements or modifies some of the provisions of the Cola and Allied Beverage Agreements.

The Supplementary Agreement provides that The Coca-Cola Company will:

exercise good faith and fair dealing in its relationship with the Company under the Cola and AlliedBeverage Agreements;

offer marketing funding support and exercise its rights under the Cola and Allied Beverage Agreements in

a manner consistent with its dealings with comparable bottlers;

offer to the Company any written amendment to the Cola and Allied Beverage Agreements (except

amendments dealing with transfer of ownership) which it enters into with any other bottler in the United

States which are parties to contracts substantially similar to the Cola and Allied Beverage Agreements;

and

subject to certain limited exceptions, sell syrups and concentrates to the Company at prices no greater

than those charged to other bottlers which are parties to contracts substantially similar to the Cola and

Allied Beverage Agreements.

The Supplementary Agreement permits transfers of the Companys capital stock that would otherwise belimited by the Cola and Allied Beverage Agreements.

Pricing of Coca-Cola Trademark Beverages and Allied Beverages in the Legacy Territories.

Pursuant to the Cola and Allied Beverage Agreements, except as provided in the Supplementary Agreement

and the Incidence Pricing Agreement (described below), The Coca-Cola Company establishes the prices charged

to the Company for concentrates of Coca-Cola Trademark Beverages and Allied Beverages. The Coca-Cola

Company has no rights under the beverage agreements to establish the resale prices at which the Company sells

its products.

Since 2008, however, the Company has been purchasing concentrate from The Coca-Cola Company for all

sparkling beverages for which the Company purchases concentrate from The Coca-Cola Company under an

incidence-based pricing arrangement and has not purchased concentrates at standard concentrate prices as was

the Companys practice in prior years. During the two-year term of the current incidence-based pricingagreement that will end on December 31, 2015, the pricing of such concentrate will continue to be governed by

the incidence-based pricing model rather than the Cola and Allied Beverage Agreements for the Legacy

Territories. Under the incidence-based pricing model, the concentrate price The Coca-Cola Company charges is

impacted by a number of factors, including the incidence rate in effect, the Companys pricing and sales of

finished products, the channels in which the finished products are sold and package mix.

Still Beverage Agreements with The Coca-Cola Company for the Legacy Territories.

The Company purchases as finished goods and distributes certain still beverages, such as sports drinks and

juice drinks, from The Coca-Cola Company, or its designees or joint ventures, and produces, markets and

distributes Dasani water products, pursuant to the terms of marketing and distribution agreements applicable to

the Legacy Territories (the Still Beverage Agreements). In some instances the Company distributes certain still

beverages in the Legacy Territories without a written agreement. The Still Beverage Agreements for the Legacy

Territories contain provisions that are similar to the Cola and Allied Beverage Agreements with respect toauthorized containers, planning, quality control, transfer restrictions, and related matters but have certain

significant differences.

Exclusivity. Unlike the Cola and Allied Beverage Agreements, which grant the Company exclusivity in

the distribution of the covered beverages in its Legacy Territories, the Still Beverage Agreements grant

exclusivity but permit The Coca-Cola Company to test-market the still beverage products in the Companys

Legacy Territories, subject to the Companys right of first refusal, and to sell the still beverages to commissaries

6


25/144

for delivery to retail outlets in the Companys Legacy Territories where still beverages are consumed on-

premises, such as restaurants. The Coca-Cola Company must pay the Company certain fees for lost volume,

delivery, and taxes in the event of such commissary sales. Approved alternative route to market projects

undertaken by the Company, The Coca-Cola Company, and other bottlers of Coca-Cola products would, in some

instances, permit delivery of certain products of The Coca-Cola Company into the territories of almost all

bottlers, in exchange for compensation in most circumstances, despite the terms of the beverage agreements

making such territories exclusive. Also, under the Still Beverage Agreements for the Legacy Territories, theCompany may not sell other beverages in the same product category.

Pricing. The Coca-Cola Company, at its sole discretion, establishes the prices the Company must pay for

the still beverages purchased as finished goods or, in the case of Dasani, the concentrate or finished goods, but

has agreed, under certain circumstances for some products, to give the benefit of more favorable pricing if such

pricing is offered to other bottlers of Coca-Cola products.

Term. Each of the Still Beverage Agreements for the Companys Legacy Territories has a term of 10 or

15 years and is renewable by the Company for an additional 10 years at the end of each term. The Company

currently intends to renew substantially all of the Still Beverage Agreements as they expire.

Other Beverage Agreements with The Coca-Cola Company.

The Company has entered into a distribution agreement with Energy Brands, Inc. (Energy Brands), awholly owned subsidiary of The Coca-Cola Company. Energy Brands, also known as glacau, is a producer and

distributor of branded enhanced water products including vitaminwater, smartwater (still beverage products), and

fruitwater (a sparkling water drink). The agreement has a term of 10 years and will automatically renew for

succeeding 10-year terms, subject to a 12-month nonrenewal notification by the Company. The agreement covers

most of the Companys Legacy Territories, requires the Company to distribute Energy Brands enhanced water

products exclusively, and permits Energy Brands to distribute the products in some channels within the

Companys Legacy Territories.

The Company also sells Coca-Cola and other post-mix products of The Coca-Cola Company on a non-

exclusive basis. The Coca-Cola Company establishes the prices charged to the Company for post-mix products of

The Coca-Cola Company. In addition, the Company produces some products for sale to other Coca-Cola bottlers

and CCR. These sales have lower margins but allow the Company to achieve higher utilization of its production

equipment and facilities.

The Company entered into an agreement with The Coca-Cola Company in 2008 regarding brand innovation

and distribution collaboration. Under the agreement, the Company grants The Coca-Cola Company the option to

purchase any nonalcoholic beverage brands owned by the Company. The option is exercisable as to each brand at

a formula-based price during the two-year period that begins after that brand has achieved a specified level of net

operating revenue or, if earlier, beginning five years after the introduction of that brand into the market with a

minimum level of net operating revenue, with the exception that with respect to brands owned at the date of the

letter agreement, the five-year period does not begin earlier than the date of the letter agreement. In the non-

binding letter of intent the Company and The Coca-Cola Company signed in April 2013, the parties set forth their

intent to agree on the terms of the future purchase by The Coca-Cola Company of the Companys subsidiary that

develops, sells and markets these nonalcoholic beverage brands owned by the Company. The Company and The

Coca-Cola Company are currently negotiating, but have not reached final agreement on, the terms of the

proposed purchase agreement.

Beverage Agreements with Other Licensors for the Legacy Territories.

The Company has beverage agreements for the Legacy Territories with Dr Pepper Snapple Group, Inc. for

Dr Pepper and Sundrop brands which are similar to those for the Cola and Allied Beverage Agreements for the

Legacy Territories. These beverage agreements are perpetual in nature but may be terminated by the Company

upon 90 days notice. The price for syrup or concentrate is set by the beverage companies from time to time.

7


26/144

These beverage agreements also contain similar restrictions on the use of trademarks, approved bottles, cans and

labels and sale of imitations or substitutes as well as termination for cause provisions. The Company also sells

post-mix products of Dr Pepper Snapple Group, Inc.

The Company has been purchasing as finished goods and distributing certain Monster brand energy drink

products since 2007 in portions of its Legacy Territories under a distribution agreement with Monster Energy

Company (MEC). The agreement contains provisions that are similar to the Cola and Allied Beverage

Agreements with respect to pricing, promotion, planning, territory and trademark restrictions, transfer

restrictions, and related matters as well as termination for cause provisions. The agreement has a 20 year term

and will renew automatically. The agreement may be terminated without cause by either party. However, any

such termination by MEC requires compensation in the form of severance payments to the Company. In

December 2014, the Company entered into an agreement with The Coca-Cola Company (acting through its

Coca-Cola North America Division) whereby The Coca-Cola Company has consented to the Company

distributing Monster brand energy drink products in that portion of the Companys Legacy and Expansion

Territories where the Company does not currently distribute them pursuant to a new distribution agreement the

Company and MEC are currently negotiating. See Item 13. Certain Relationships and Related Transactions, and

Director Independence in Part III of this Annual Report on Form 10-K for more information about the December

2014 agreement with The Coca-Cola Company and the proposed new Monster brand energy drink products

distribution agreement.

The territories covered by beverage agreements with other licensors for the Legacy Territories are notalways aligned with the Legacy Territories covered by the Cola and Allied Beverage Agreements but are

generally within those territory boundaries. Sales of beverages by the Company under these other agreements in

the Legacy Territories represented approximately 12% of the Companys bottle/can volume to retail customers

for each of 2014, 2013 and 2012.

The Expansion Territories

Beginning in May 2014, the Company has entered into a series of transactions involving execution of

multiple CBAs under which CCR has granted the Company exclusive distribution rights in several of the

Expansion Territories for brands owned by The Coca-Cola Company in exchange for the Companys obligation

to make quarterly sub-bottling payments on an ongoing basis to CCR. These Expansion Territories include

Johnson City and Morristown, Tennessee, Knoxville, Tennessee, Cleveland and Cookeville, Tennessee and

Louisville, Kentucky and Evansville, Indiana and the surrounding regions. Contemporaneous with the signing ofeach CBA, the Company also acquired CCRs rights to distribute in each Expansion Territory beverage brands

that are not owned by The Coca-Cola Company (the cross-licensed brands) and substantially all the assets of

CCR related to the distribution, promotion, marketing and sale of The Coca-Cola Company brands and cross-

licensed brands in the Expansion Territory. The Company did not acquire from CCR any production assets or

rights to produce beverages for distribution in any of these Expansion Territories. Instead, with certain limited

exceptions, the Company has entered into a Finished Goods Supply Agreement with CCR to purchase finished

beverage products to distribute in the Expansion Territory acquired. The CBAs, which are described further

below, have terms of ten years and are renewable for successive additional terms of ten years each unless earlier

terminated as provided in such agreements.

To further implement the April 2013 letter of intent, the Company and CCR have entered into an asset

exchange agreement for the Lexington, Kentucky Expansion Territory. The Company has agreed to exchange

certain of its assets relating to the marketing, promotion, distribution and sale of Coca-Cola and other beverage

products in the region currently served by the Companys facilities and equipment located in Jackson, Tennessee

(including the rights to produce such beverages) for certain of CCRs assets relating to the marketing, promotion,

distribution and sale of Coca-Cola and other beverage products in the region currently served by CCRs facilities

and equipment located in Lexington, Kentucky (including the rights to produce such beverages). The Company

and CCR anticipate the closing of this asset exchange agreement will occur in Spring 2015.

The Company and CCR also anticipate the asset purchase agreement with CCR relating to the territory

currently served by CCR through its facilities and equipment located in Paducah and Pikeville, Kentucky

8


27/144

will close in Spring 2015. When the Paducah/Pikeville asset purchase transaction and the Jackson-for-Lexington

exchange transaction are consummated, the expansion of the geographic regions served by the Company

contemplated by the nonbinding letter of intent the Company and The Coca-Cola Company signed in April 2013

will be complete.

Agreements with The Coca-Cola Company for the Expansion Territories

Comprehensive Beverage Agreements (CBAs)

Pursuant to separate CBAs entered into at closing for each Expansion Territory transaction completed, the

Company has been granted certain exclusive rights to distribute, promote, market and sell brands of The

Coca-Cola Company and related products in such Expansion Territory. These brands include both sparkling and

still beverages. Under each CBA, the Company will make a quarterly sub-bottling payment to CCR on a

continuing basis for the grant of exclusive rights to distribute, promote, market and sell brands of The Coca-Cola

Company and related products in the applicable Expansion Territory. As of December 28, 2014, the Company

had recorded a liability of $46.9 million to reflect the estimated fair value of the contingent consideration related

to future sub-bottling payments. See Note 3 to the consolidated financial statements for additional information.

Other than the brands of The Coca-Cola Company and related products and expressly permitted existing

cross-licensed brands sold in an Expansion Territory, each CBA provides that the Company will not be permitted

to produce, manufacture, prepare, package, distribute, sell, deal in or otherwise use or handle any beverages,beverage components or other beverage products in the Expansion Territory unless otherwise consented to by

The Coca-Cola Company, subject to the terms of the Ancillary Business Letter described below.

The Companys Obligations.The Company is obligated under the CBA, among other things, to:

make capital expenditures in its business in the Expansion Territory as reasonably required for the

Company to comply with its obligations under the CBA for the operation, maintenance and replacement

within the Expansion Territory of warehousing, distribution, delivery, transportation, vending equipment,

merchandising equipment, and other facilities, infrastructure, assets, and equipment;

buy exclusively from The Coca-Cola Company (directly or through CCR or another affiliate) or an

authorized supplier, in accordance with the Finished Goods Supply Agreement, (with certain exceptions

under which the Company can produce finished goods itself) all beverage and related products the

Company is authorized to distribute in quantities required to satisfy fully the demand in the ExpansionTerritory for such beverages;

expend such funds for marketing and promoting the beverage and related products it is authorized to

distribute as reasonably required to create, stimulate and sustain the demand for such beverages and

related products in the Expansion Territory;

maintain financial capacity reasonably necessary to develop and stimulate and satisfy fully the demand

for the beverages and related products the Company is authorized to distribute in the Expansion Territory

and to assure the Company will be financially able to perform its obligations under the CBA; and

provide specified financial information to The Coca-Cola Company to the extent, in the form and manner,

and at such times as reasonably required by The Coca-Cola Company to determine whether the Company

is performing its obligations under the CBA.

Term and Termination. Each CBA has a term of ten years and is renewable by the Company indefinitely

for successive additional terms of ten years each unless a CBA is earlier terminated upon the occurrence of any

of the following, among other, events.


the Companys equipment or facilities are subject to attachment, levy or other final process that would

materially and adversely affect the Companys ability to fulfill its obligations under the CBA;

9


28/144

any other beverage agreement with the Company or any other CBA is terminated by The Coca-Cola

Company under provisions that permit termination without damages due to the Companys breach or

default, unless otherwise agreed by The Coca-Cola Company; or

the Company fails to comply with any of the Companys obligations under the CBA or breaches in any

material respect any of the Companys other material obligations under the CBA and fails to cure the

default in accordance with the cure provisions specified in the CBA.

Finished Goods Supply Agreements

The grant of exclusive rights pursuant to each CBA to distribute, promote, market and sell brands of The

Coca-Cola Company and related products in the applicable Expansion Territory does not include the right to

produce such beverage products. Instead, the Company and CCR have entered into a Finished Goods Supply

Agreement for each Expansion Territory pursuant to which the Company will purchase from CCR substantially

all of the Companys requirements in the applicable Expansion Territory for brands of The Coca-Cola Company

and related products and expressly permitted existing cross-licensed brands at a cost-based price, subject to

adjustment in accordance with the incidence-based pricing agreement that the Company entered into with The

Coca-Cola Company described above, as applicable to the Expansion Territory. Under certain exceptions, the

Company may produce finished goods itself for distribution in an Expansion Territory.

The Ancillary Business Letter

The Company and The Coca-Cola Company entered into the Ancillary Business Letter in May 2014

granting the Company certain advance waivers to acquire or develop certain lines of business in the Expansion

Territories involving the preparation, distribution, sale, dealing in or otherwise using or handling of beverages,

beverage components or other beverage products that would otherwise be prohibited under the CBAs. In

connection with receiving such waivers and in recognition of the substantial management time and resources of

the Company needed to complete the acquisition and integration of the Expansion Territories, the Company has

agreed that during the period beginning on May 23, 2014 and continuing until January 1, 2017 (the Focus

Period) it will not acquire or develop any line of business inside or outside of the Expansion Territories without

the consent of The Coca-Cola Company (which consent cannot be unreasonably withheld). This restriction is

subject to certain limited exceptions described in the Ancillary Business Letter. This restriction also may

terminate sooner if either party provides notice to the other (i) that it is terminating discussions regarding the

Company receiving rights to any Expansion Territory contemplated by the April 13, 2013 letter of intent or, (ii) iftransactions for all of the Expansion Territory transactions contemplated by such letter of intent have been

consummated, that it does not intend to pursue any other transactions that would result in additional territory

expansion by the Company. In exchange, The Coca-Cola Company has agreed in the Ancillary Business Letter

that, following the Focus Period, certain types of activities relating to the preparation, distribution, sale, dealing

in or otherwise using or handling beverages, beverage components and other beverage products that would

otherwise be prohibited by the CBAs for the Expansion Territories will be permitted without its consent. As a

result, following the Focus Period, The Coca-Cola Companys consent (which cannot be unreasonably withheld)

will only be required under the CBAs for the acquisition or development by the Company in the Expansion

Territories of (i) any grocery, quick service restaurant, or convenience and petroleum store business engaged in

the sale of beverages, beverage components and other beverage products not permitted by the CBAs (Prohibited

Beverages), or (ii) any other line of business engaged in the preparation, distribution, sale, dealing in, using or

handling of Prohibited Beverages in which all beverage activities in the aggregate constitute more than ten

percent (10%) of the net sales of such business.

Markets Served and Production and Distribution Facilities

The Company currently holds bottling rights in its Legacy Territories from The Coca-Cola Company

covering the majority of North Carolina, South Carolina and West Virginia, and portions of Alabama,

Mississippi, Tennessee, Kentucky, Virginia, Pennsylvania, Georgia and Florida. The total population within the

Companys Legacy and Expansion Territories completed as of December 28, 2014 is 22.4 million.

10


29/144

As of December 28, 2014, the Company currently operates in seven principal geographic markets. Certain

information regarding each of these markets follows:

1. North Carolina. This region includes the majority of North Carolina, including Charlotte, Raleigh,

Greensboro, Winston-Salem, High Point, Hickory, Asheville, Fayetteville, Wilmington, and the surrounding

areas. The region has a population of 9.4 million. The Company has a production/distribution facility in

Charlotte and 12 sales distribution facilities located throughout the region.

2. South Carolina. This region includes the majority of South Carolina, including Charleston,

Columbia, Greenville, Myrtle Beach and the surrounding areas. The region has a population of 3.8 million.

There are six sales distribution facilities located throughout the region.

3. South Alabama. This region includes a portion of southwestern Alabama, including Mobile and

surrounding areas, and a portion of southeastern Mississippi. The region has a population of 1.0 million. The

Company has a production/distribution facility in Mobile and four sales distribution facilities are located

throughout the region.

4. South Georgia. This region includes a small portion of eastern Alabama, a portion of southwestern

Georgia including Columbus and surrounding areas and a portion of the Florida Panhandle. This region has

a population of 1.1 million. The Company has four sales distribution facilities located throughout the region.

5. Tennessee. This region includes a significant portion of central and eastern Tennessee, including

Nashville, Johnson City, Morristown, and Knoxville and surrounding areas, a small portion of southernKentucky and a small portion of northwest Alabama. The region has a population of 4.1 million. The

Company has a production/distribution facility in Nashville and six sales distribution facilities are located

throughout the region. The region includes portions of the Companys Legacy Territories and several

Expansion Territories, including Johnson City, Morristown and Knoxville.

6. Western Virginia. This region includes most of southwestern Virginia, including Roanoke and

surrounding areas, a portion of the southern piedmont of Virginia, a portion of northeastern Tennessee and a

portion of southeastern West Virginia. The region has a population of 1.6 million. The Company has a

production/distribution facility in Roanoke and four sales distribution facilities are located throughout the

region.

7. West Virginia. This region includes most of the state of West Virginia and a portion of southwestern

Pennsylvania. The region has a population of 1.4 million. The Company has eight sales distribution facilities

located throughout the region.

Subsequent to December 28, 2014, the Company acquired additional distribution territories in Cookeville,

and Cleveland, Tennessee, Louisville, Kentucky, and Evansville, Indiana. These Expansion Territories serve a

population of 3.1 million and have a total of four sales distribution facilities.

The Company is a member of South Atlantic Canners, Inc. (SAC), a manufacturing cooperative located in

Bishopville, South Carolina. All eight members of SAC are Coca-Cola bottlers and each member has equal

voting rights. The Company receives a fee for managing the day-to-day operations of SAC pursuant to a

management agreement. Management fees earned from SAC were $1.8 million, $1.6 million and $1.5 million in

2014, 2013 and 2012, respectively. SACs bottling lines supply a portion of the Companys volume requirements

for beverage products. The Company has a commitment with SAC that requires minimum annual purchases of

17.5 million cases of beverage products through June 2024. Purchases from SAC by the Company for finished

products were $132 million, $137 million and $141 million in 2014, 2013 and 2012, respectively, or 25.9 million

cases, 26.2 million cases and 27.5 million cases of finished product, respectively.

Raw Materials

In addition to concentrates obtained from The Coca-Cola Company and other beverage companies for use in

its beverage manufacturing, the Company also purchases sweetener, carbon dioxide, plastic bottles, cans,

closures and other packaging materials, as well as equipment for the production, distribution and marketing of

nonalcoholic beverages.

11


30/144

The Company purchases substantially all of its plastic bottles (12-ounce, 16-ounce, 20-ounce, 24-ounce,

half-liter, 1-liter, 1.25-liter, 2-liter, 253 ml and 300 ml sizes) from manufacturing plants owned and operated by

Southeastern Container and Western Container, two entities owned by various Coca-Cola bottlers, including the

Company. The Company currently obtains all of its aluminum cans (7.5-ounce, 12-ounce and 16-ounce sizes)

from two domestic suppliers. None of the materials or supplies used by the Company are currently in short

supply.

Along with all the other Coca-Cola bottlers in the United States, the Company is a member in Coca-Cola

Bottlers Sales and Services Company, LLC (CCBSS), which was formed in 2003 for the purposes of

facilitating various procurement functions and distributing certain specified beverage products of The Coca-Cola

Company with the intention of enhancing the efficiency and competitiveness of the Coca-Cola bottling system in

the United States. CCBSS negotiates the procurement for the majority of the Companys raw materials

(excluding concentrate).

The Company is exposed to price risk on commodities such as aluminum, corn, PET resin (a petroleum-

based product), and fuel which affects the cost of raw materials used in the production of finished products. The

Company both produces and procures these finished products. Examples of the raw materials affected are

aluminum cans and plastic bottles used for packaging and high fructose corn syrup used as a product ingredient.

Further, the Company is exposed to commodity price risk on oil, which impacts the Companys cost of fuel used

in the movement and delivery of the Companys products. The Company participates in commodity hedging and

risk mitigation programs administered both by CCBSS and by the Company itself. In addition, no limit is placedon the price The Coca-Cola Company and other beverage companies can charge for concentrate. However, under

the Incidence Pricing Agreement, The Coca-Cola Company must give the Company at least 90 days written

notice of a pricing change.

Customers and Marketing

The Companys products are sold and distributed directly to retail stores and other outlets, including food

markets, institutional accounts and vending machine outlets. During 2014, approximately 68% of the Companys

bottle/can volume to retail customers was sold for future consumption. The remaining bottle/can volume to retail

customers of approximately 32% was sold for immediate consumption, primarily through dispensing machines

owned either by the Company, retail outlets or third party vending companies. The Companys largest customer,

Wal-Mart Stores, Inc., accounted for approximately 22% of the Companys total bottle/can volume to retail

customers and the second largest customer, Food Lion, LLC, accounted for approximately 9% of the Companystotal bottle/can volume to retail customers. Wal-Mart Stores, Inc. and Food Lion, LLC accounted for

approximately 15% and 6% of the Companys total net sales, respectively. The loss of either Wal-Mart Stores,

Inc. or Food Lion, LLC as customers could have a material adverse effect on the operating and financial results

of the Company. All of the Companys beverage sales are to customers in the United States.

New product introductions, packaging changes and sales promotions have been the primary sales and

marketing practices in the nonalcoholic beverage industry in recent years and have required and are expected to

continue to require substantial expenditures. Brand introductions from the Company and The Coca-Cola

Company in recent years include Tum-E Yummies, Fuel in a Bottle Energy Shot, Fuel in a Bottle Protein Shot,

Coca-Cola Zero, Dasani flavors, Coca-Cola Life, Full Throttle and Gold Peak tea products. New packaging

introductions include the 253 ml bottle, the 1.25-liter bottle, the 7.5-ounce sleek can, the 2-liter contour bottle for

Coca-Cola products, and the 16-ounce bottle/24-ounce bottle package.

The Company sells its products primarily in nonrefillable bottles and cans, in varying proportions frommarket to market. For example, there may be as many as 23 different packages for Diet Coke within a single

geographic area. Bottle/can volume to retail customers during 2014 was approximately 44% cans, 55% bottles

and 1% other containers.

Advertising in various media, primarily television and radio, is relied upon extensively in the marketing of

the Companys products. The Coca-Cola Company and Dr Pepper Snapple Group, Inc. (collectively, the

Beverage Companies) make substantial expenditures on advertising in the Companys Legacy and Expansion

12


31/144

Territories. The Company has also benefited from national advertising programs conducted by the Beverage

Companies. In addition, the Company expends substantial funds on its own behalf for extensive local sales

promotions of the Companys products. Historically, these expenses have been partially offset by marketing

funding support the Beverage Companies provide to the Company in support of a variety of marketing programs,

such as point-of-sale displays and merchandising programs. However, the Beverage Companies are under no

obligation to provide the Company with marketing funding support in the future.

The substantial outlays the Company makes for marketing and merchandising programs are generally

regarded as necessary to maintain or increase revenue, and any significant curtailment of marketing funding

support provided by the Beverage Companies for marketing programs which benefit the Company could have a

material adverse effect on the operating and financial results of the Company.

Seasonality

Sales of the Companys products are seasonal with the highest sales volume occurring in the second and

third quarters. The Company has, and believes CCR has, adequate production capacity to meet sales demand for

sparkling and still beverages during these peak periods. See Item 2. Properties for information relating to

utilization of the Companys production facilities. Sales volume can also be impacted by weather conditions.

Competition

The nonalcoholic beverage market is highly competitive. The Companys competitors include bottlers anddistributors of nationally advertised and marketed products, regionally advertised and marketed products, as well

as bottlers and distributors of private label beverages in supermarket stores. The sparkling beverage market

(including energy products) comprised 80% of the Companys bottle/can volume to retail customers in 2014. In

each region in which the Company operates, between 85% and 95% of sparkling beverage sales in bottles, cans

and other containers are accounted for by the Company and its principal competitors, which in each region

includes the local bottler of Pepsi-Cola and, in some regions, the local bottler of Dr Pepper, Royal Crown and/or

7-Up products.

The principal methods of competition in the nonalcoholic beverage industry are point-of-sale

merchandising, new product introductions, new vending and dispensing equipment, packaging changes, pricing,

price promotions, product quality, retail space management, customer service, frequency of distribution and

advertising. The Company believes it is competitive in its territories with respect to these methods of

competition.

Government Regulation

The production and marketing of beverages are subject to the rules and regulations of the United States

Food and Drug Administration (FDA) and other federal, state and local health agencies. The FDA also

regulates the labeling of containers under The Nutrition Labeling and Education Act of 1990. The Nutrition Facts

label has not changed significantly since it was first introduced in 1994. In 2014, the FDA proposed new rules

that would result in major changes to nutrition labels on all food packages, including the packaging for the

Companys products, that would, among other things, require those labels to display caloric counts in large type,

reflect larger portion sizes and display on a separate line on the label the amount of sugars that are added to the

product. The comment period on the proposed rules closed in August 2014. If these proposed rules are adopted

by the FDA, the Company expects to have up to two years to put the required labeling changes into effect on the

packaging for the products it manufactures and distributes.

As a manufacturer, distributor and seller of beverage products of The Coca-Cola Company and other soft

drink manufacturers in exclusive territories, the Company is subject to antitrust laws of general applicability.

However, pursuant to the United States Soft Drink Interbrand Competition Act, soft drink bottlers such as the

Company may have an exclusive right to manufacture, distribute and sell a soft drink product in a defined

geographic territory if that soft drink product is in substantial and effective competition with other products of

the same general class in the market. The Company believes such competition exists in each of the exclusive

geographic territories in the United States in which the Company operates.

13


32/144

From time to time, legislation has been proposed in Congress and by certain state and local governments

which would prohibit the sale of soft drink products in nonrefillable bottles and cans or require a mandatory

deposit as a means of encouraging the return of such containers in an attempt to reduce solid waste and litter. The

Company is currently not impacted by this type of proposed legislation.

Soft drink and similar-type taxes have been in place in West Virginia and Tennessee for several years.

Proposals have been introduced by members of Congress and certain state governments that would impose excise

and other special taxes on certain beverages that the Company sells. The Company cannot predict whether any

such legislation will be enacted.

Most of the beverage products sold by the Company are classified as food or food products and are therefore

eligible for purchase using supplemental nutrition assistance (SNAP) benefits by consumers purchasing them

for home consumption. Some states and localities have proposed barring the use of SNAP benefits by recipients

in their jurisdictions to purchase some of the products the Company manufactures. The United States Department

of Agriculture rejected such a proposal by a major American city as recently as 2011. Energy drinks that have a

nutrition facts label are classified as food and are eligible for purchase for home consumption using SNAP

benefits while energy drinks that are classified as a supplement by the FDA are not.

The Company has experienced public policy challenges regarding the sale of soft drinks in schools,

particularly elementary, middle and high schools. A number of states have regulations restricting the sale of soft

drinks and other foods in schools. Many of these restrictions have existed for several years in connection withsubsidized meal programs in schools. The focus has more recently turned to the growing health, nutrition and

obesity concerns of todays youth. Restrictive legislation, if widely enacted, could have an adverse impact on the

Companys products, image and reputation.

Environmental Remediation

The Company does not currently have any material capital expenditure commitments for environmental

compliance or environmental remediation for any of its properties. The Company does not believe compliance

with federal, state and local provisions that have been enacted or adopted regarding the discharge of materials

into the environment, or otherwise relating to the protection of the environment, will have a material effect on its

capital expenditures, earnings or competitive position.

Employees

As of February 1, 2015, the Company had approximately 5,600 full-time employees, of whom

approximately 420 were union members. The total number of employees, including part-time employees, was

approximately 7,300. Approximately 6% of the Companys labor force is covered by collective bargaining

agreements. Two collective bargaining agreements covering approximately 5% of the Companys employees

expired during 2014 and the Company entered into new agreements in 2014. One collective bargaining

agreement covering approximately .3% of the Companys employees will expire in 2015.

Exchange Act Reports

The Company makes available free of charge through the Companys Internet website,

www.cokeconsolidated.com, the Companys annual report on Form 10-K, quarterly reports on Form 10-Q,

current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such

materials are electronically filed with or furnished to the Securities and Exchange Commission (SEC). The SECmaintains an Internet website, www.sec.gov, which contains reports, proxy and information statements, and other

information filed electronically with the SEC. Any materials that the Company files with the SEC may also be

read and copied at the SECs Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D. C. 20549.

Information on the operations of the Public Reference Room is available by calling the SEC at 1-800-SEC-

0330. The information provided on the Companys website is not part of this report and is not incorporated

herein by reference.

14


33/144

Item 1A. Risk Factors

In addition to other information in this Form 10-K, the following risk factors should be considered carefully

in evaluating the Companys business. The Companys business, financial condition or results of operations

could be materially and adversely affected by any of these risks.

The Company may not be able to respond successfully to changes in the marketplace.

The Company operates in the highly competitive nonalcoholic beverage industry and faces strong

competition from other general and specialty beverage companies. The Companys response to continued and

increased customer and competitor consolidations and marketplace competition may result in lower than

expected net pricing of the Companys products. The Companys ability to gain or maintain the Companys share

of sales or gross margins may be limited by the actions of the Companys competitors, which may have

advantages in setting their prices due to lower raw material costs. Competitive pressures in the markets in which

the Company operates may cause channel and product mix to shift away from more profitable channels and

packages. If the Company is unable to maintain or increase volume in higher-margin products and in packages

sold through higher-margin channels (e.g., immediate consumption), pricing and gross margins could be

adversely affected. The Companys efforts to improve pricing may result in lower than expected sales volume.

Changes in how significant customers market or promote the Companys products could reduce revenue.

The Companys revenue is affected by how significant customers market or promote the Companysproducts. Revenue has been negatively impacted by less aggressive price promotion by some retailers in the

future consumption channels over the past several years. If the Companys significant customers change the

manner in which they market or promote the Companys products, the Companys revenue and profitability

could be adversely impacted.

Changes in the Companys top customer relationships could impact revenues and profitability.

The Company is exposed to risks resulting from several large customers that account for a significant

portion of its bottle/can volume and revenue. The Companys two largest customers accounted for approximately

31% of the Companys 2014 bottle/can volume to retail customers and approximately 21% of the Companys

total net sales. The loss of one or both of these customers could adversely affect the Companys results of

operations. These customers typically make purchase decisions based on a combination of price, product quality,

consumer demand and customer service performance and generally do not enter into long-term contracts. Inaddition, these significant customers may re-evaluate or refine their business practices related to inventories,

product displays, logistics or other aspects of the customer-supplier relationship. The Companys results of

operations could be adversely affected if revenue from one or more of these customers is significantly reduced or

if the cost of complying with these customers demands is significant. If receivables from one or more of these

customers become uncollectible, the Companys results of operations may be adversely impacted.

Changes in public and consumer preferences related to nonalcoholic beverages could reduce demand for

the Companys products and reduce profitability.

The Companys business depends substantially on consumer tastes and preferences that change in often

unpredictable ways. The success of the Companys business depends in large measure on working with the

Beverage Companies to meet the changing preferences of the broad consumer market. Health and wellness trends

throughout the marketplace have resulted in a shift from sugar sparkling beverages to diet sparkling beverages,

tea, sports drinks, enhanced water and bottled water over the past several years. Failure to satisfy changing

consumer preferences, particularly those of young people, could adversely affect the profitability of the

Companys business.

The Companys sales can be impacted by the health and stability of the general economy.

Unfavorable changes in general economic conditions, such as a recession or economic slowdown in the

geographic markets in which the Company does business, may have the temporary effect of reducing the demand

15


34/144

for certain of the Companys products. For example, economic forces may cause consumers to shift away from

purchasing higher-margin products and packages sold through immediate consumption and other highly

profitable channels. Adverse economic conditions could also increase the likelihood of customer delinquencies

and bankruptcies, which would increase the risk of uncollectibility of certain accounts. Each of these factors

could adversely affect the Companys revenue, price realization, gross margins and overall financial condition

and operating results.

The inability of the Company to successfully integrate the operations of the Expansion Territories and any

future expansion territories into the Companys existing operations and implement the new contractual

arrangements for the Expansion Territories could adversely affect the Companys business, financial

condition or results of operations.

The following pose potential risks relative to the Expansion Territories: the Companys ability to

successfully combine the Companys business with the Expansion Territories, including integrating distribution,

sales and administrative support activities and information technology systems between the Companys Legacy

Territories and the Expansion Territories; and the Companys ability to successfully operate in the Expansion

Territories: motivating, recruiting and retaining key employees; conforming standards, controls (including

internal control over financial reporting, environmental compliance and health and safety compliance),

procedures and policies and business cultures between the Company and the Expansion Territories; growing

business with existing customers and attracting new customers; and other unanticipated problems and liabilities.The territory expansion transactions the Company has recently completed and any future e